Venezuela’s Spectacular Underperformance

Venezuela is a major oil-exporting economy that is so badly mismanaged that real (inflation-adjusted) per capita GDP today is 2% lower than it was in 1970, despite a ten-fold increase in oil prices. And now its president is lashing out at academics who have the temerity to point that out.

CAMBRIDGE – If it were not such an affront to the freedom of expression, we would almost be amused by Venezuelan President Nicolás Maduro’s recent tantrum over a commentary by economists Ricardo Hausmann and Miguel Angel Santos. Venezuela has long lashed out at the International Monetary Fund for daring to suggest that its macroeconomic policies might not be working well. Now its president is lashing out at academics.

Maduro, of course, rules over a major oil-exporting economy that is so badly mismanaged that real (inflation-adjusted) per capita GDP today is 2% lower than it was in 1970, despite a ten-fold increase in oil prices. Hausmann and Santos had the temerity to ask whether, having defaulting on every conceivable kind of domestic debt, Venezuela should invite foreign investors to the party and default on its debt to them as well. Is it such an unreasonable question?

It is unclear whether Maduro, who called for Venezuela’s authorities to take unspecified “action” against Hausmann and Santos (both Venezuelan citizens), was more offended by the suggestion that his government should default on external debt, or by the authors’ list of all the other ways it has already defaulted. These include the government’s $3.5 billion unpaid bill for pharmaceutical imports, payment arrears of more than $2 billion for food, and nearly $4 billion owed to airline companies. Oil production has more than halved since 1997, in no small part because the state-owned oil company has repeatedly defaulted on suppliers and joint-venture partners.

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